Why I Bought Wal-Mart and Sold Sears [View article]
Wal-Mart is a great company in a tremendous competitive position. However, that doesn't make it a great investment. If the company's returns track its business results over the next ten years you might be in for a disappointment. Assuming a 10% sales growth means that WMT will sell 440 billion next year and over 1 Billion in ten years time. It's possible, of course, but it's difficult to add 40B in sales next year.
Sears on the other hand offers some interesting scenarios. One is the real estate another the liquidation and yet another the successful transformation of the company. The real estate is often in desirable locations (the last to decline in value and first to go back up); Target, Home Depot, and others would love to buy the best 300-400 stores from Sears. In fact, as Ackman pointed out yesterday, this is one of the reasons he wanted to free up capital for Target.
The less desirable locations are also sometimes rented at well below market leases. Inventory reductions from store closures or sales turns into cash which can either be reinvested in the business or returned to shareholders.
While an investment in Sears is not as compelling as it was when the company was trading in the high 20's per share, I believe it will trump WMT over the next 5-10 years.
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Why I Bought Wal-Mart and Sold Sears [View article]
Why I Bought Wal-Mart and Sold Sears [View article]
Sears on the other hand offers some interesting scenarios. One is the real estate another the liquidation and yet another the successful transformation of the company. The real estate is often in desirable locations (the last to decline in value and first to go back up); Target, Home Depot, and others would love to buy the best 300-400 stores from Sears. In fact, as Ackman pointed out yesterday, this is one of the reasons he wanted to free up capital for Target.
The less desirable locations are also sometimes rented at well below market leases. Inventory reductions from store closures or sales turns into cash which can either be reinvested in the business or returned to shareholders.
While an investment in Sears is not as compelling as it was when the company was trading in the high 20's per share, I believe it will trump WMT over the next 5-10 years.
Time will tell, thanks for the post.
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